Family Security Law Group, APC write about estate planning, wills, trusts, durable power of attorney, title and property agreements, special trusts, probate, trust administration and more!

July 2015

07/31/2015

An incentive trust is any trust that rewards beneficiaries with distributions for desired behavior. They are popular for people who fear that their heirs will waste a large inheritance. Below are some tips if you are considering setting up an incentive trust.

Incentive trusts sound like a great idea to many people. We want our heirs to do good things with their lives and not receive a large inheritance only to blow the money on wasteful things.

For example, if you are creating a trust for a minor child, you might want to create a trust that rewards the child for graduating from college or getting a job.

Not all incentive trusts are created equally, however, and it is important to set one up properly or it is likely to fail.

Decide whether you want to create specific things for beneficiaries to perform to receive distributions or if you want to leave everything up to the discretion of the trustee.

Determine whether payments should be made directly to the beneficiary or to a third party. For example, if the trust is to provide money for school, should the trustee distribute that money to the school in the form of tuition or give it to the beneficiary to pay the school?

Decide how long the trust should exist. You can keep the trust in place for the beneficiary's entire life or you can set the trust to terminate at a certain point.

Decide what will happen to the trust assets if the beneficiary does not live up to expectations.

Make sure that all key conditions are spelled out in the trust.

It is important to note that some courts will not enforce incentive trusts that require actions that are against public policy, such as requiring a person to marry a person of a certain race or religion.

Make sure to consult with an attorney about what types of conditions you can make.

07/30/2015

If the executor of an estate does not do certain things, then he or she can get in trouble. However, there are other things that can lead to trouble if an executor does do them.

It is relatively easy for the executor, also known as the personal representative of an estate, to learn about his or her responsibilities in that role. Most instructional guides are written in the positive and outline the steps that should be taken.

That can leave a lot of important information out, however, if the executor is not also given advice about what to avoid doing during the process.

07/29/2015

When one child is left out of a will without explanation, it often leads to problems with other siblings. Such is the case with one son of wealthy mining magnate Harry Magnuson, who is suing his siblings over an inheritance.

In 2002, Harry Magnuson and his wife Colleen had wills drawn up that left everything to the surviving spouse. Upon the death of the surviving spouse, the overall estate was to be divided equally among their five children.

Harry passed away in 2009 and Colleen received everything as planned. However, when she passed away, everything was not divided equally between all of the children.

Colleen had signed a new will in 2011 that revoked the 2002 will and completely disinherited her son, Thomas. The remaining four children inherited everything. Thomas was not amused.

Apparently, the new will was prepared by a notary working in the law office of one of the other Magnuson siblings. This has predictably led to problems.

Thomas Magnuson is suing his siblings, claiming that they conspired to unduly influence their mother to have him cut out of the will. The Spokesman-Review reported this story in a recent article titled "Magnuson son sues siblings."

It is too soon to know what will happen in this case. This is yet another example of what happens when there is a lot of money at stake and a family member does not think that he or she was treated fairly in an estate plan.

Even if the other four siblings are found to have not unduly influenced their mother to rewrite her will, this case will likely cost the family a lot of money and hurt feelings.

If you really want to disinherit one of your descendants, be sure to contact an experienced estate planning attorney.

07/28/2015

Many wealthy people seek to control how their heirs can spend inheritances. However, some seek to use inheritances as a way to control how their heirs live their lives. Such is the case with a recently deceased tycoon.

Maurice Laboz passed away with a net worth of approximately $35 million. In his will, he left $10 million to each of his daughters, who are currently 17 and 21 years old.

As is often the case, Laboz did not leave all of that money to his daughters right away. Instead, they must wait until they are 35 years old to receive their inheritances.

However, what is somewhat unusual is that Laboz left ways for his daughters to get some of the money early if they will do things he approves of. For example, they can receive early payments if they get married, only having children in wedlock, and graduate from an accredited university.

These types of pre-conditions to receiving an early inheritance are not normally encouraged by estate planners. One potential issue is that they might have a tendency to make heirs resentful.

By and large, people do not like being told how they should live their lives and do not like feeling manipulated when it comes to things like getting married and having children.

Thus, while the conditions Laboz set might not seem like anything particularly harmful, their mere existence could have unintended consequences. In this particular case, these conditions might become moot.

Laboz was in the process of divorcing his wife when he passed away. The divorce was not finalized and he cut her completely out of the will. She is likely to challenge it.

An experienced estate planning attorney can advise you on the benefits and detriments to “incentivizing” an estate plan.

07/27/2015

Until now, when someone passed away, we offered a basic memorialized account which was viewable, but could not be managed by anyone. By talking to people who have experienced loss, we realized there is more we can do to support those who are grieving and those who want a say in what happens to their account after death.

Facebook recently launched a new feature that could help your loved ones through the grieving process in the event of your death. It's called a "Legacy Contact."

If you are a Facebook user, you may want to go into your account now and designate your Legacy Contact to manage your account when you pass away. Here is how it works when someone passes away:

Of course, many state legislatures are currently wrestling with how to handle digital accounts after the user passes away.

Consequently, this issue might eventually be taken out of Facebook's hands entirely. Until then, contact an experienced estate planning attorney to help you make arrangements for your “digital assets” pending future legislation.

07/24/2015

Business and asset owners (including farming operations), at some point in their career lives, must ask the eternal question, “What happens when I’m gone?” Answering this question is critical to understanding and planning for the disposition of assets both before and after death. Two things are discussed often. One is estate planning, and the other is businesses transition. Many times these two processes are thought to be the same. Actually, they are very different.

Remember that estate planning doesn’t have to pass assets to an individual. A business asset (tangible and intangible) and ownership can also be transferred to a legal entity, such as a corporation, limited liability company, or a trust. And this can happened whenever the owner decides.

Business transition is simply the transfer of a business asset or the entire entity from an existing owner who has decided to retire or move on. This usually occurs during the life of the existing owner. However, when a business transfer takes place after the death of the owner, it’s usually part of an existing or implied estate plan or asset transfer process.

The process of business transfer can be a very simple process, or it can be complex and dynamic with many steps, based upon the wishes of the existing owner. There is a valuation of the business and the resources that must take place. The transfer of the tangible and intangible assets can occur through the cash purchase of individual items, a purchase of share interest, and/or purchase of stock or certificates. A cash sale, just like when buying a house, is the quickest and cleanest. A larger company with stockholders and a corporate structure takes some time.

The article reminds us that there are a number of similarities between estate plans and transition plans, but the big difference is timing of the transfer. Estate plans deal with the transfer of tangible and intangible assets and interests after the owner has died. A business transfer plan typically happens when the owner is still alive.

Neither of these is designed to be a replacement for the other. They work together, to fulfill the wishes of the business owner.

A qualified estate planning attorney can help a business owner sort out the issues and create both plans according to the owner’s wishes.

07/23/2015

It’s important to plan for the future. This is especially true for families who have a loved one with Alzheimer’s disease or another form of dementia. If planning is done early, the person with the disease may be able to participate more in the decision making. Planning early can also reduce future stress for the family of the person with the disease. When someone has Alzheimer’s disease or another dementia, legal plans and financial plans are important to put in place.

The Lincoln (NE) Journal Starrecently contained an article about caring for a loved one with Alzheimer’s disease or another form of dementia. “Planning the future of a loved one with dementia” discussed some helpful information in both financial and legal planning.

You will encounter a number of costs in caring for a person with dementia. Planning for these expenses and costs throughout the course of the disease will involve examining all the costs you could possibly face now and in the future. These can include prescription drugs, personal care supplies, adult day care services, in-home care services, and residential care services.

Discuss financial needs and goals as early as possible. This way the person with the disease will be able to comprehend the issues, take a role in mapping out his or her objectives, and clarify their wishes. An experienced elder law attorney will have worked with financial advisors and will be able to point out potential financial resources, uncover tax deductions, and counsel against imprudent investment decisions. You may have these financial resources available to help you with the costs during the course of the disease:

Health care coverage

Long-term care insurance

Life insurance

Medicaid

Veterans benefits

Other public programs:

In addition, many states have state-funded, long-term care available, such as adult day care and respite care.

Legal capacity is the ability to understand the meaning and importance of a legal document, such as a power of attorney. A person suffering from dementia who has the ability to understand and appreciate the consequences of his or her actions to execute a document needs to be the decision-maker. As long as he or she possesses legal capacity, they should take part in legal planning. The article recommends these documents:

Living will

Power of Attorney

Health Care Directive or Power of Attorney

Will

Living Trust

Guardianship/Conservatorship

Talk to an experienced and qualified estate planning attorney if you have questions about elder care for your loved one.

07/22/2015

Addressing your aging parents’ finances is not easy. Several years ago, when Gwen's mom started showing signs of memory loss, she had conversations with her about her finances. The daughter felt awkward probing her mom about her accounts, income and estate-planning documents, but that small amount of discomfort was worth it. It would’ve been incredibly difficult to get the information the daughter needed to take over her finances as her dementia progressed if they hadn’t had the money talk with her while she was relatively lucid. She was fortunate that her mom was willing, for the most part, to have these conversations. Plenty of older adults don’t want to talk about money with their children. “People hold tight to their bootstraps,” said Gwen Morgan, author of the “What If … Workbook,” a guide that helps people give loved ones necessary information if anything happens to them. “They don’t want to let the information out.”

Go Banking Ratesrecently posted an article entitled, “How to Talk About Money With Your Aging Parents,” which emphasized that even if your parents are hesitant to open up, the sooner you talk to them about money, the better. If not, it only becomes more difficult to obtain the information you need to help them manage their money and make decisions if they become incapacitated. In the worst case scenario, one would have to go to court to get control. This has the potential to destroy families. No one wants to resort to that.

Here are several strategies from the article to get aging parents to discuss their finances. Make sure that the conversation is respectful. Also, make certain that it’s understood that you’re not trying to take over your parents’ finances. Starting with an area that doesn’t feel like a loss of power may be more successful, the article advises.

1. Use a story. Whether true or not, this can get the ball rolling. It can be about someone who did or didn’t have information about his elderly parents’ finances and what happened: major headaches for the children because they didn’t have any information about the father’s accounts or legal documents. Assure your parents that you want to make sure this doesn’t happen to your family and suggest that they divulge some of their financial information now.

2. Get help from your siblings. The child with the closest relationship with the parent should start the conversation, with the other kids joining in later conversations to discuss specific details about your parents’ money.

3. Talk about your own situation. The article notes that you might be able to get your parents to speak more freely if you share what you’ve done to get your own financial affairs in order. This can include that you’ve met with an estate planning attorney to create documents such as a will and trust. Also, let your parents know that you have a list of your accounts and passwords to give to your spouse if the unforeseeable occurs. Then ask your parents what steps they’ve taken.

4. Discuss your parents’ future. Inquire of your parents about their plans for retirement. This is a more general discussion that can get things going, the article said. You can ask if they plan to downsize or what sort of care they’d like to receive if something happened. This could start a detailed discussion about their finances.

There are several other great tips in the article, one of which is to get some help from an expert. If your parents aren’t willing to talk to you, suggest that they meet with an estate law attorney. He or she can help urge your parents to share important financial information with you.

07/21/2015

The estate tax draws heated debate between advocates and opponents, with some referring to the levy as a "death tax," while others argue that the estate tax is a key vehicle in fighting economic inequality over the generations. Regardless of what you think of the estate tax, estate tax rates are still extremely high compared to many other types of taxes. That can be devastating to some families, but it also creates a big incentive to plan ways to avoid it. Let's take a look at the estate tax rates for 2015 and briefly discuss some tactics you can use to reduce your estate tax bill.

The Fox Business article, “2015 Estate Tax Rates: How Much Will You Pay?” notes that the rate structure for the estate tax has remained virtually unchanged since 2013. There are various rates, in a somewhat complicated structure, involving 13 different brackets:

Amount of Taxable Estate

Tax Bracket

$0-$10,000

18%

$10,001-$20,000

20%

$20,001-$40,000

22%

$40,001-$60,000

24%

$60,001-$80,000

26%

$80,001-$100,000

28%

$100,001-$150,000

30%

$150,001-$250,000

32%

$250,001-$500,000

34%

$500,001-$750,000

37%

$750,001-$1 million

39%

Over $1 million

40%

Source: IRS

Before you do any number crunching, remember that the federal government has an estate tax exemption for all estates more than $5.43 million (in 2015). The “lifetime exemption amount” is the cut-off mark for how much wealth each person can pass to their heirs without owing any estate tax.

The article explains that the exemption is different than a standard deduction. What you do is look at all your taxable estate assets and knock out the first $5.43 million. If you have more than that, the estate tax will be at the maximum rate of 40% on the portion of the estate that’s above the $5.43 million threshold.

An estate planning attorney can help you with some ways to reduce or even eliminate your estate tax liability. This can include gifts during your lifetime to reduce your estate assets at your death. The law says that you can give an individual up to $14,000 annually without having to pay any gift tax. If you give more than that amount, you'll start using up your lifetime exemption. You don’t want that!

There are also many more complicated methods of giving money to potential heirs during your lifetime that can reduce your eventual estate tax bill. Talk with your estate planning attorney about these more complex strategies and leave more money for your heirs and less for taxes.

07/20/2015

Several years ago, a man passed away and left everything to the stepmother of his children. The children were not nearly as concerned about the wife receiving financial assets as they were with her decision to have an estate sale to liquidate the home and furnishings. If these grown kids wanted to retain toys from their childhood or other mementos, they’d just have to bid along with everyone else. Unresolved inheritance issues like these can cause serious rifts between family members even with relatively simple estates. That’s why good estate planning may include drafting a Letter of Instruction or a formalized version for inheriting just personal property called a Personal Property Memorandum.

“Simple Steps to Prevent Future Family Inheritance Rifts,” a recent article in Forbes, explained that typically, personal assets like jewelry, cars, and furniture aren’t included in a will because listing everything can be tedious and unnecessary. But there are two types of documents that can help make sure that these tiny details are as you want.

A Personal Property Memorandum is a legally binding document. It is to be referred to in the will that is to list all the personal property you want to leave to your heirs and loved ones. A personal property memorandum is recognized in 30 states and must be referred to in the will. But the document doesn’t need to be notarized or witnessed. The article suggests that you clearly describe these items so they aren’t confused with others. For example, “All of the Barry Manilow LPs in my collection are to go to Cousin Buddy.” Make sure your executor or executrix has the correct information, as well. You don’t want the wrong relative to walk off with your disco records!

The second document is called a Letter of Instruction. This is a non-legally binding document that you can create to convey any specific wishes. You may not be able to create a legally binding document to bequeath personal property, so this letter can be a terrific tool to detail the disposal of these things. Here are the types of items that you may want to include in a Letter of Instruction that might not be contained in a Personal Property Memorandum. The article says to think of a Letter of Instruction as a “cheat sheet” to estates. It might contain the following:

The location of important legal documents;

All pertinent contacts for legal, tax and financial information and advice;

Any prepaid funeral arrangements;

Burial or cremation wishes; including hymns or speakers you’d like at your memorial;

A list of financial assets with the beneficiaries and account numbers, PINs, usernames and passwords where applicable;

The location of your latest tax return and Social Security statements;